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From supply chain management to the future of web hubs

By January 24, 2008 2 Comments

I bought a new video camera on Amazon this weekend, and I also bought an extra battery and a couple of SD cards.  So far so normal.  The amazing thing to me is that I ended up buying each of these three items from different suppliers on Amazon’s market place, and the last of the three arrived today, four days after the order was placed.  One came from the UK and two from Germany.  The postage was inexpensive.

That is an amazing piece of supply chain management, and if one company had tried to do it my guess is they would have screwed something up.

This is testimony to Amazon’s incredible transformation into an infrastructure business and also the power of the web.

John Batelle has a number of definitions of web2.0.  The one I like the most is:

companies that let other companies build their businesses

This is what Amazon are doing in spades now.  Third party suppliers open an Amazon Market Place account and their products become available to all Amazon’s traffic through the same search box that you use to buy books directly from Amazon.   When you buy something through the market place Amazon takes a commission and makes a 100% margin.  Amazon also gets to benefit from the innovation and creativity of their market place suppliers in product choice, presentation and pricing.

The website experience could have been a little slicker, but that is splitting hairs really.  Plus I didn’t find another website where I could buy all the items I wanted.

But the really incredible thing is the way Amazon have combined their brand/traffic with a piece of technology infrastructure to become the glue that holds a vibrant ecosystem of suppliers and customers together.  To borrow a thought from Umair this is increasingly how successful companies will operate.  Facebook and their apps are like this, and Myspace with their widgets, Google with search and adwords is similar, even Salesforce with their app-exchange is on the same model.  And I almost forgot ebay.

These examples show just how much value is created by these fluid hubs where people come together and are matched with each other and products they want.  The scale and fluidity these sites have is only possible because of the internet.  Excitingly as we see more scale and fluidity (more people on the web and more creative ways to match and bring people together) I believe the things that seem incredible today will begin to seem trivial.  Think about Second Life, for example.